[{"data":1,"prerenderedAt":63},["ShallowReactive",2],{"term:is-lm-model":3},{"term":4,"related":46},{"id":5,"title":6,"body":7,"category":27,"description":28,"extension":29,"faq":30,"meta":31,"navigation":32,"path":33,"related":34,"seo":39,"stem":40,"takeaways":41,"__hash__":45},"terms\u002Fterms\u002Fis-lm-model.md","IS–LM Model",{"type":8,"value":9,"toc":22},"minimark",[10,15,19],[11,12,14],"h2",{"id":13},"understanding-islm-model","Understanding IS–LM Model",[16,17,18],"p",{},"The IS curve shows combinations of interest rates and output where planned spending equals output: lower rates raise investment, so output rises. The LM curve shows combinations where money demand equals money supply: higher output raises money demand and pushes rates up.",[16,20,21],{},"Developed by John Hicks in 1937 to formalize Keynes's ideas, IS–LM became the workhorse of intermediate macroeconomics. Fiscal policy shifts IS; monetary policy shifts LM (or, in modern versions, sets the interest rate directly).",{"title":23,"searchDepth":24,"depth":24,"links":25},"",2,[26],{"id":13,"depth":24,"text":14},"economy","A model of how interest rates and output are jointly set by the goods market and the money market.","md",[],{},true,"\u002Fterms\u002Fis-lm-model",[35,36,37,38],"keynesian-economics","liquidity-preference","crowding-out","monetary-policy",{"title":6,"description":28},"terms\u002Fis-lm-model",[42,43,44],"IS represents the goods market; LM the money market.","Their intersection gives short-run output and the interest rate.","It is the core short-run model in Blanchard, Mankiw and Dornbusch.","Z36ZBzIsbhJSoErO2O_rrYyth9umolQVjwJCYGq3RjM",[47,51,55,59],{"title":48,"description":49,"path":50},"Crowding Out","When government borrowing reduces private investment by pushing up interest rates.","\u002Fterms\u002Fcrowding-out",{"title":52,"description":53,"path":54},"Keynesian Economics","The school of thought that total demand drives output and employment in the short run, and that policy can stabilize it.","\u002Fterms\u002Fkeynesian-economics",{"title":56,"description":57,"path":58},"Liquidity Preference","Keynes's theory that interest rates are set by the demand for and supply of money.","\u002Fterms\u002Fliquidity-preference",{"title":60,"description":61,"path":62},"Monetary Policy","How a central bank manages interest rates and the money supply to steer the economy.","\u002Fterms\u002Fmonetary-policy",1793374005218]